While many drivers of business valuations like predictable cash flow, customer diversity, and growth potential are well known, an often-overlooked element is the importance of the company’s existing management team. When private equity (PE) is considering acquisition targets, the numbers absolutely matter, but having the right leadership team in place is also a key driver of value. Brian Andreosky, President of Aldrich Capital Advisors, and Greg Togni, Managing Partner at 180one, an executive-level recruiting firm based in Oregon, discuss how a solid management team is key to a successful sale.
Brian Andreosky (BA): The M&A landscape is constantly evolving, and the start of 2025 has been especially unpredictable. What kind of changes have you seen lately when it comes to the focus of PE firms and what’s important to them?
Greg Togni (GT): As an executive search firm serving a lot of midsize companies, we’re often brought in by PE firms who are increasingly focusing on the small and middle market. PE is looking for companies they can help grow, then get a good return from down the road. When they buy a company, they’re also buying a management team and want to ensure there’s a strong leadership team in place already. Especially in an uncertain environment, companies should do as much as they can ahead of time to make sure the management team they have today is possibly the management team that can take the company to the next level in the future. This increases the value of the company significantly. PE firms value companies with management teams that are ready now, so they don’t have to do the work of finding that team and potentially disrupting the company while putting the new team in place.
BA: What teams should a company have in place before a transaction?
GT: I tell owners to recognize the team they need for the transaction. A lot of companies are still led by founders, who are entrepreneurs with amazing vision who built their management team with people as passionate as they are. But having the ability to get the company to the next level can be a blind spot with founders. Getting a company to $50 million in revenue is an amazing achievement, but the skills needed to get that enterprise to $100 million might be very different. Having a high-performing management team that’s ready to go through a transaction helps provide more options on possible buyers, be it a strategic or private equity firm. Ultimately, you want to be able to shop your company to different buyers and get into a bidding war. If you only have one path to go with when selling because you don’t have a great management team, you reduce the number of potential buyers, which could lead to a reduced valuation.
BA: How important is it to proactively plan for a transition by building out a leadership team well in advance of stepping away?
GT: It’s important to plan ahead and be proactive. We get a lot of requests from founder CEOs who want to turn over the day-to-day management to someone else. Their expectation is that someone will just come in and take over for them on day one. Transitions take time—instead of hiring a new CEO at the last minute, think of bringing in, for example, a VP of operations ahead of time, so they can learn the business and move into the top role down the road. Getting the right team in place a year or two in advance of selling ensures that they really know the company, its key drivers, and other important data that the buyer can rely on.
BA: What else should owners consider when planning for a future transition to ensure they can attract and retain the kind of leadership needed to grow the company’s value?
GT: Owners need to consider compensation programs, which are completely evolving. Gone are the days of paying a base salary, good benefits, and an annual bonus. Now, you need to have a long-term incentive plan. That could be in the form of cash, phantom stock, or equity plans—but it needs to be in place so you can compete for the kind of leaders who will take the company to the next level. Long-term incentive plans drive up the value of the company and create retention.
BA: Can you share a success story where the management team was a key value driver in a sale?
GT: We had a client that was an awesome company with a great brand. Operationally, they had challenges meeting demand and hitting their capacity targets. The owner had a vision for selling, but they were hesitant to bring in a leader from a bigger company because they were afraid it wouldn’t be a good fit. But working at a big company doesn’t necessarily mean you can only work at a big company. They moved forward with that candidate, and six months later, the company achieved the most throughput in the history of the organization and then sustained it. That drove up the value of the company significantly, and the CEO told us that they should have hired that external candidate years ago.
BA: Many of our small- or middle-market companies may not have a CFO or other management leaders in place. How might this impact their value, and how should they think about potentially building out their management team?
GT: As an example, private equity firms want to make sure the company lives on beyond the founder and isn’t solely dependent on one person to drive the business. CEOs are often the number-one salesperson and have all the client relationships. PE is looking for the sales function to be a little more institutionalized. On the finance side, they’re also looking to have a CFO on the other side of the transaction who speaks the same language and provides them with the accurate and complete information they need and can rely on. There are studies that say a good CFO can add between 10 to 20% more to the sale price of a company. It can be a hard thing for a lot of founders to understand, because a CFO may not be your number two while you’re running the business—but when you want to sell it, they become very important.
BA: While 2024 was a little softer for M&A, it looks like we’ve turned the corner a bit in 2025. Any words of advice for business owners who are starting to think about professionalizing their teams for an eventual transition?
GT: There’s a lot of pent-up demand, and I think there will be a lot of transactions this year. Again, planning and being proactive are key. The amount of work that gets put on the executive team once they get into a letter of intent and due diligence is huge, and it adds a lot of pressure on that team because they still have to run the business. Having conversations with your advisors right now sets everybody up for success, because you can’t onboard a CFO or other new management team members and have them add value in 90 days. It takes time.
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About Brian Andreosky
Brian Andreosky is President of Aldrich Capital Advisors, and is dedicated to helping business owners transition their companies. In this role, he provides exit planning services to help business owners find the right solution to transition and maximize the value of their business. Brian is a member of the Exit Planning Institute (EPI). Prior to joining Aldrich, he held roles in investment management, management consulting, and private equity.
About Greg Togni
As the Managing Partner of 180one, Greg Togni wears many hats, including setting strategic vision, team development, process improvement, and the overall success of 180one on behalf of its clients. His 20-plus years of executive search experience includes working with middle market, family owned, or multi-billion-dollar public companies across a wide variety of industries, including manufacturing, distribution, industrial technology, and professional services.
About Aldrich Capital
Aldrich Capital Advisors LP provides advisory services for business transactions, including succession planning, acquisitions, or mergers. We help business owners navigate challenges and unlock growth opportunities with actionable insights. Our innovative team is dedicated to your success.
